Thanks for flying all the way out.
Yeah, it's a nice flight.
So, why don't you just tell everybody about your background? Early investor in Twitter, Twitch, you know, Floodgate being a major, a major angel for many years.
Yeah. So, I guess I'm one of the OG seed investors. So, I invest either too early or way too early in startups. So, you know, when I invested in Twitter, they were trying to decide whether to call it TWWTR or voicemail 2.0. You know, Lyft started out as Zimride. Okta was Sasher. And so, yeah, too early, way too early, or legally ambiguously too early.
Well, you were one of the seeds of seed investing itself. Like seed investing wasn't even a thing that people did. It wasn't a category, right?
Yeah. Yeah. So, it's hard to believe now, but in 2005, you couldn't raise a million dollars in Silicon Valley. You raised either a quarter of a million dollars from angels and friends, or you went straight to a $5 million Series A, right?
And so, a bunch of things happened. You know, you had the LAMP stack and you had Amazon with web services emerging. And so, you know, my saying was that 500,000 is the new 5 million. And so, that was kind of how we got started.
So, we've kind of, you know, it's funny to put it this way. We both, you know, have about 30 years in tech in some ways. Me since college and... where did the time go?
Yeah. Yeah. Exactly. So, you know, now today though, that era of Silicon Valley may be coming to an end. And with, you know, Larry Page, Sergey Brin, Zuckerberg, Larry Ellison, Elon, Thiel all leaving California, many of our mutual friends, colleagues and so on not in the news. You know, what are your thoughts on that? Because you saw the talk I gave 13 years ago and that arc you were saying is playing out.
Yeah. So, and I don't know how many folks have seen Balaji's talk at Y Combinator in 2013. Okay. So there were, you gave that talk, but there were two or three things that you said at that time that really stuck with me. So I was working on a set of ideas that I called Networked Capitalism. And so I thought that networks were beginning to subvert the modern corporation and become the most valuable companies. And what you made me realize, you talked about a few things. One is Albert Hirschman's book, Exit, Voice and Loyalty, which I think you're going to have a panel on later on. And then I think the other thing you mentioned was the paper belt. And I started to realize that the paper belt was a metaphor for more than just companies. It was a metaphor for all the institutions in the western world. And then you wrote an essay, I think it was called like 'Software is Reorganizing the World'. And so that was to me, that was kind of like your first foray into sort of declaring the network state.
That's funny because there was, you know, I was a very private person. That was the first talk I ever gave and both Sorkin's New York Times and the Wall Street Journal denounced me for doing that 13 years ago. Which is fun. Very first talk. And so right after I heard your talk at YC, I reached out to Andre and I said, 'Can you introduce me to this guy?'
And he said that you generate more ideas in a given time frame than anybody he knows.
Well, I love Mark and I love, you know, everything. We've been sort of on the sidelines of this whole tech thing for the last several years exchanging observations and I think we have a lot of values in common. You know, we saw how the valley built out and, you know, one of the things that also, you mentioned three things from the talk which were the concept of exit, voice and loyalty, the reorganizing the world like the mass migrations and the paper belt. And of course they're all kind of tied together where the disruption of technology causes a backlash from the institutions and leads to a physical exit. But, you know, one of the things that I didn't fully anticipate over the last 13 years is, you know, tech has become really, really popular. And the thing is in becoming that popular, you know, obviously you're a capitalist, I'm a capitalist, but the capitalism part of techno-capitalism has made a lot of people in the valley chase money per se more like sooner, shorter term, you know, right? And I, you know, I think the values that underpin the valuations are very important and you've always been a very win-win person. I'd love to hear your thoughts on that. Is that changing? Do you think, you know?
Yeah. So, if I zoom out, one of the ways I think about a startup or at least what I'm interested in is it's a break from the present. So, a startup that matters has to refuse something. So, I'm not interested in investing in a better version of something. I want to invest in a brand new version of what's never been. And to me that's the way entrepreneurs win is not by being better but by changing the subject, you know. Go ahead, T.
And so therefore, it stands to reason that those people need a certain type of help because everybody's moving forward this way, assuming the future is going to look like that. The founders I want to work with are out here and they're saying, 'No, that's not going to be the future. There's a different future.' And what they need to do, as long as they don't want to stay there all by themselves, they have to persuade people to join a movement. And so movements literally move early believers to that different future. And they co-create the future. You, early customers and employees co-create the future with founders. And so that's what I'm really interested in. So then back to your question, you want to have all of the team, the early investors, the early customers, the right kind of crazy together, right? Everybody tends to believe in a hidden truth that the rest of the world doesn't believe yet. In fact, most great startup ideas, most people don't like at first. And so you want to have people that are animated by belief, by the same set of beliefs. And one of the challenges right now is there's so much money and so many sources of money and the valuations have gotten so high that founders can become tempted to try to play term sheets against each other, get the best price they can, but you know, you got to live with that investor for the rest of the time, right? It's not just one round.
Yeah. I mean this is the thing is basically, you know, I go back and forth on this because obviously, you know, the capitalism part of techno-capitalism has resulted in this huge engine pulling all this stuff forward that would otherwise just be theory, but it also is resulting in more and more short-term behavior and more envy as a consequence, right? Because, you know, people are seeing these gigantic fortunes. So many of our mutual friends have either exited California, exited Silicon Valley, made backup plans and so on. What are you seeing with that given, you know, what's happening?
Yeah, the thing that I'm seeing is that unfortunately California's governance has become the logical conclusion of the unchecked lack of accountability and a government monoculture. And so, you know, like there's that train that we've spent over 10 billion on less than a mile of track. And the weird thing about it is a lot of the folks in California politics don't think there's anything wrong with that because that money went to a bunch of unionized workers. And so you get to this thing where I'm going to take taxes from a large group of people and I'm going to curry favor with a small set of people whether it's the teachers unions or other types of unions. And you know, to some degree it's massive scale legalized organized crime. Yes. Right. It's not, it's extractive governance rather than governance that responds to the needs of the people. And so at some point you either try to fix that or you realize that they're just coming for you. They're going to seize everything. So exactly, and the way I think about this is, you know, the blue business model or the party, not the people, which is the same thing that happened in Soviet Russia, but here it's a little more subtle where essentially in California elections are held but the party always wins and it doesn't actually have competitive multi-party elections. And now the thing is that when that started in the early 2010s, that's when the, like, there was a Schwarzenegger era, there was an era within our memory where there was still some multi-party competition, but when that competition went to zero, when they actually had a total monopoly on political power, you could have the NGOs receiving money to hand out syringes and that employed party people, you could have the hundred billion dollar California train to nowhere, you could have various boondoggles of solar subsidies and so on, and all of that as you point out employs party faithful who their job is a function of this and they're just, you know, how many hundred thousand people worked on this train, mission accomplished in that sense, are going to show up to vote. So I think when something like that is happening, you have a subset of the tissue that's sort of devouring the host and you have to exit because they've got the political power and it's very hard to surgically just dislodge that, you know.
Yeah. So, you either have to exit or you have to have a quick escape hatch.
And so, a lot of the people I know in California, and this is the part that's more sobering, is a lot of people I know have a backup plan. They have a plan B that they can activate very quickly. And this is the thing that these people don't understand, you know, when they try to pass these wacky laws and taxes and goofy nonsense like the trains or they can't build a sunshade in LA, that kind of, or houses. People readjust their expectations based on how people act and people have options and it's an option. This is the thing is so many of these laws or movements are based on a 20th century world of stationarity and immobility and lack of options as if the entire world wasn't one click away, you know, and they were like, oh, where would you live other than California? But there's so many places that one could go. On the third hand, I've been surprised by how long it took some of our colleagues to move. On the fourth hand, I'm not surprised that they eventually did.
Yeah. And you know, the funny thing is I don't want to move. Like I think that the land in coastal California is wonderful. I love the weather. I love the people I get to work with. If it ever comes to pass that I have to move, it'll be just because they ran me off, right? I have no desire to move.
Well, you know, so on this, I've been thinking about this and I think the frontier is the filter. That is to say, like the more desirable the land, the less desirable the land, and vice versa. What I mean by that is if the land itself has some amazing climate or something like that, so many people will be fighting over it that it's red ocean. And so instead, what you want is relatively undesirable land, which is blue ocean, you know, like the thing you're just saying where it's a piece of land that someone can see a potential in, a future in that nobody else does. And then it's more desirable because it's not desirable. Nobody else cares about it. So you have the freedom to do what you want, which is actually the key thing, not so much the climate per se. I don't know your thoughts on that.
Yeah. Well, I mean part of what I like about what you're doing is, you know, to some degree the network state ethos is don't get mad, get organized.
And you know, you can do things within the state of California just like you can do things by exiting California. You know, exit is what gives voice its power. Right. And the opportunity and the optionality to exit. So I still like that land a lot. I still like living there a lot. And so I'm trying my hardest to, you know, make it work. The thing that's scary about it though is that they've taken on so many liabilities in the future that you just, you get to a point where it's like, how are they not just going to seize everything? And when that happens, the exit becomes inevitable, which would be really sad. That's the thing is I think in general it's always better to jump than be pushed, you know, if you know that's coming, then much better to do it on your own terms, you know. And where are you seeing people go? Obviously some of our friends gone to Texas, some to Florida, some now to Argentina and so on.
Yeah, Texas, Florida, where else? You know, I'd say those are the main places.
Yeah. So Dubai also is up. Yep.
Anything that is an interesting place that you know you've been looking at that others don't know about yet? Like I don't know, Uruguay, something like that.
I wish, I'm too busy. But you know, this Kazakhstan, I mean just legendary, you just come and visit. You come visit.
Yeah. Yeah. Yeah. I mean it's just what they've done and just their ambition and the chutzpah is just extraordinary. I mean it's just so impressive to see that that's happening in the world.
This is good. I mean they had such a tough 20th century. You know, like that was where like gulags were. It was like the Soviet Union was there and so on. So they really deserve the, you know, the amazing stuff they're building there now. It's crazy to go there and see how modern it is and realize that within living memory that was communist. And then conversely, right, like if you think about California 40 years ago and then what it is now, it's like two curves that are, you know, that's why I say it's not third world and first world anymore. It's an ascending world and descending world, you know.
Yeah. And, you know, it kind of illustrates your idea that history is going in reverse, right, in some ways. Yeah. Because the thing about this is, you know, in tech, people like you and me, we know that things get disrupted, right? You know that Kodak had its day and then it wasn't there anymore, right? Or Hollywood had its day and it's really getting disrupted. But, you know, many people for whatever reason they can only think about that at the level of a company, but not one level beyond at the level of a community or an institution or a country. Would you have any thoughts on that? I've got theses.
Yeah. Well, another thing that influenced me a lot, it was even before your speech, was his book, The Sovereign Individual.
And one of my takeaways from that book was that technology was going to make the economics of coercion less attractive.
